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TMI Blog2006 (6) TMI 511X X X X Extracts X X X X X X X X Extracts X X X X ..... ion. 3. The impugned circular is issued by the Commissioner is exercise of his power U/S. 3-A (2) of the Karnataka Sales Tax Act 1957 (hereinafter referred to as KST Act for short) based on the observations made in the Judgment of this Court in the case of Poonam Stone Processing Industries -vs- Deputy Commissioner of Commercial Taxes (Admn), Gulbarga division, Gulbarga other reported in STC vol.94 page-182) wherein, it has been categorically held as under: Cuddaph, Shahabad and marble are stones of special value in the market and the marketable quality of these stones is enhanced by polishing and cutting. But the substance of the material is not altered. The article is made more presentable and attractive for the benefit of the users and it cannot be said that the activity is a manufacturing activity. From the above dictum it is clear that cutting, sizing and polishing of stones such as Cuddapah, Shahabad and marble, according to the requirement of its users/customers will not amount to manufacturing of a new product. Thus, the Commissioner thought it fit to issue the aforesaid circular to inform all the subordinate officials of the Commercial Tax Department to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orted in vol.118 STC [age 409 (Poonam Stone Processing Industries -vs- Deputy Commissioner of Commercial Taxes (Admn) Gulbarga division, Gulbarga others) and that therefore, the circular issued by the Commissioner, based on the observations made by the learned Single Judge is bad in the eye of law; the activity of petitioner in cutting and polishing of the granite stone will not come within the meaning of manufacturing activity and that therefore, the impugned circular is issued under mistaken notion that the act of cutting and polishing of granite stone is the activity of manufacturing. In support of his contentions he relies upon the Judgment passed by the Division Bench of this Court in the case of State of Karnataka another -vs- Goa Granites, Bangalore reported in 2006 (60) Kar. L.J. 110 (DB); that the Legislature has treated the unpolished and polished stones as different commodities after 1991, as is clear from item.17 part-S, of second schedule appended to the Karnataka Sales Tax Act; that as per the provisions of Section-3-A of the KST Act , the Commissioner shall only clarify the ambiguity if any in the matter of assessment of taxes and he cannot himself directly ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessment orders passed by the Assessing Authority cannot be sustained, as they are issued on the premise that the sale of polished granite stones would be a sale of fresh commodity and such sale of polish granite stone amounts of re-sale. He further submits that through there is change in the form of the goods/article, there is no change in its substance. Per contra, Sm.t Nilaufer Akbar learned AGA., by filing here statement of objections opposed the above contentions urged by the petitioners and argued in support of the impugned circular and assessment orders and the orders relating to levy of penalty. 6. The learned Single Judge of this Court, in the case of Poonam Stone s case reported in vlume-94 STC-182 cited supra, as aforesaid, has observed that cutting, sizing an polishing of stones such as Cuddapah, Shahabad and marble will not aount to manufacturing of new product. Though the said judgment of the learned Sigle Judge rendered in the above case in set aside by the Division Bench of this Court in the case reported in STC Vol.118 page 409 ( Poonam Stone Processing Industries -vs- Deputy Commissioner of Commercial Taxes (Admn) Gulbarga Division, Gulbarga others), the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is perfectly in order. 5. Merely cutting a rough block of granite into different sizes to the requirement of the customers would not involve any manufacturing activity. In that view of the matter, we do not think the view taken by the Tribunal is wrong in any manner. In the view we have taken non-production of the valuation certificate in this case does not assumes any significance. Thus, the aforesaid Judgment of the Division Bench in the Foredge Granite s case makes it amply specifically clear that the activity relating to cutting and polishing of granite block is not manufacturing activity. In other words, the substance of the material that is granite stone is not altered. Though the granite block is made to the sizes according to the specific requirement or the benefit to users, it cannot be said that cutting and polishing of granite block is not a manufacturing activity. Thereby, the polished granite stones are not the changed products, but they continue to be a granite blocks, whatever may be the size of said granite blocks, for the purpos3es of imposition of sales tax on first. 7. It is no doubt true that the Division Bench of this Court in the case of State ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y from case to case and there may, may not be, application of energy or force to effect a processing. It is the effect of processing operations that is material for determining whether there has been processing of goods . .. that mere mixing or blending different goods so as to make goods of a different quality or specification did amount to processing, though not a manufacture . 8. In view of the clear dictum laid down by the Division Bench of this Court in the case of Foredge Granite Pvt. Ltd., this Court deems fit to hold that the activity of cutting and polishing of rough granite block will not amount to manufacturing activity and that the polished granite stones could be imposed Sales Tax for the second time prior to 1-4-2002 i.e. prior to amendment to Section.5B of KST Act. Thus, the circular in so far as it relates to clause-3(a) is concerned, as extracted above is just and proper. However, the impugned Circular in so far as it relates clause-3(b) is concerned, is not proper inasmuch as the same is opposed to the dictum laid down by the Division Bench of this Court in the case of M/S. Foredgc Granite s case cited supra. 9. The Commissioner has referred to Part-S e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iled by the State makes it clear that the dealers as well as the department were under the impression that for purchasing the unpolished rough granite block/stone to use the same for conversion into cut and polished granite stone, Form nos. 37 were to be used. Consequently, the department was permitting industrial units in the State of purchase unpolished rough granite block/stones for use in conversion into cut and polished granite stones against issue of Form No.37 declaration at the concessional tax rate provided. Thus, it cannot be said that the petitioners are at fault in using Form No.37 at the time of purchasing of rough granite stones. The department was also permitting for the same. Thus, it is amply clear that there is no malice on the part of the petitioners and consequently, it cannot be said that they have intentionally misused Form No.37. Under these facts and circumstances, it is not possible for this Court to held that there is a mis-declaration by the petitioners with a mala fide intention to evade the payment of tax for the year 1994 i.e. prior to amendment of Section-6B of the Act. 12. In the case of Commissioner of Income Tax -vs- Angidi Chettiar reported i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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